Finish Line Announces A Strategic Review: What This Means

Finish Line Announces A Strategic Review: What This Means

Companies often face the problem of being too bloated by controlling too many brands or products. Often times it could become distracting for management to focus on its core-product or may feel it to be beneficial to the company and shareholders to divest a unit either by selling it or spinning it off into a separate company.

More often than not, news of a divestiture excites shareholders as it can extract value. For example, ConAgra Foods (NYSE: CAG), a leading packaged goods food company that sells products ranging from microwavable popcorn to frozen potatoes, announced this year it will split itself into two businesses.

The new company, Lamb Weston, will focus solely on frozen food, such as frozen potato, appetizers and other vegetable products, while Conagra Brands will focus on packaged goods found outside of the freezer aisle.

Essentially, the company split itself into two pure-play food companies that allows separate management teams to independently focus 100 percent on their respective brands. The move eliminates a lot of the red tape and better positions each company to sharpen their strategic focus.

Shareholders gain direct exposure to two separate food companies each with their own unique investment profile.

Finish Line Announces Strategic Alternative Review

Finish Line (NASDAQ: FINL) is a small-cap specialty retailer that operates two divisions. The company’s core Finish Line store is a retailer of athletic shoes, apparel and accessories.

The other division, JackRabbit, is a lifestyle retailer of precision-fitted running shoes, apparel and accessories.

Finish Line announced on Tuesday that its Board of Directors will explore strategic alternatives for its JackRabbit segment as part of an initiative to better focus on its core store brand which has shed market share to the much larger Foot Locker (NYSE: FL).

Finish Line stated that among some of the options considered includes an outright potential sale of the JackRabbit brand.

The logic behind the move is simple. Finish Line branded stores across the U.S. total 980 while there are just 70 JackRabbit stores. Needless to say, spending resources promoting a brand that represents a fraction of the overall business may be seen as a poor investment and selling it to an outside firm would provide management with a new inflow of cash and a renewed focus on fixing the core brand.

Indexes

STAY CONNECTED

At Stockmarketdaily.co, we give investors our free and unbiased view of Stock market and also on what happening in global markets. Our team undoubtedly analyse tons of companies every day and provide their unbiased opinion on them. We are always looking over income statements, earnings, analyst updates, joint ventures and balance sheets.
We don’t receive compensation from any of the stocks We write about. Also, We don’t “short” any of the stocks We criticise.